The Schwartz Report

Negative Investor Reaction Brings Halt to Dell Buyout Vote

As a chorus of major investors including Blackrock and mutual fund giant Vanguard said they were going to vote against Dell's bid to buy out its shares to take the company private, at the 11th hour the vote, scheduled for yesterday morning, was postponed until next Wednesday.

The move buys company officials a few extra days to reverse the growing tide against the deal but it appears as if Dell is only delaying the inevitable.

Of course anything can happen and the easiest way to save the deal would be for Dell and his investor team, led by Silver Lake Partners, to sweeten the bid. They have steadfastly said they won't raise their $13.65 per share bid valued at $24.4 billion. I suspect if it becomes clear the only way he can get enough votes to salvage it, Dell and his team will raise their bid. But they won't do so until the bewitching hour.

Nevertheless activist investor Carl Icahn is pushing relentlessly for Dell to do so and Icahn has put his money where his mouth is with his counteroffer to acquire Dell's shares for $14 plus warrants that would give investors a continued stake in the company. Icahn continues to maintain his bid is superior and the Dell offer undervalues the company. Dell has argued the offer by Icahn and his team led by Southeastern Asset Management is risky.

In a statement yesterday, Icahn said he wasn't surprised by Dell's 11th-hour delay adding that it validates his contention that investors are underwhelmed by the offer. "We believe that this delay reflects the unhappiness of Dell stockholders with the Michael Dell/Silver Lake offer, which we believe substantially undervalues the company," he said. "This is not the time for delay but the time to move Dell forward."

Though it's far from certain that Icahn's would prevail if Dell's is voted down, Icahn has indicated he would replace the entire board and would bring in a new CEO to replace Michael Dell. But for now the focus by both sides is to either seal this deal or vote it down.

Dell will spend the next several days trying to twist quite a few arms and change the minds of those who have indicated they'll vote against the deal. As Yogi Berra famously said: "It ain't over till it's over." Of course yay or nay, this saga is far from over.